We are all traders now!
“ETF’s are a great innovation, but an over-population of any innovation could cause unintended consequences if left unmonitored. We have seen this in many market cycles, from dot-com to the credit crisis … This time won’t be different.”
–Troy Draizen, head of electronic trading at Convergex Execution Solutions
In Wednesday’s opening missive, “The Bull Won’t Die Easily,” I gave a lengthy explanation why, even though the market’s complexion is clearly changing, I am not short and why I am maintaining a market-neutral position. (The day before, in “Feeling…

Who says politicians arent an innovative bunch? Just take a look at the federal budget, and one discovers considerable innovation in dreaming up ways to take and spend other peoples money.
Among the many destructive tax measures imagined and imposed by government officials over the decades well, actually, over the centuries the death tax (or estate tax) stands out as a particularly egregious levy.
After paying assorted and substantial taxes and fees to various levels of government over a lifetime, the tax man shows up at death to claim a percentage of the deceaseds assets….

In the last month, California Governor Jerry Brown declared the 5-plus year California drought officially over and Sacramento Democrats, with the help of one rogue Republican State Senator, passed a billion gas and vehicle tax increase. Both actions were applauded by Sacramento leaders as fixing serious challenges facing the state, but in reality, Californiaâs one-party rule squandered two excellent opportunities to ensure two serious problems plaguing the Golden State were sustainably resolved. At the end of the day, California will not be ready to weather the next drought and despite…

Because of the way things have turned out, events that occurred ten years ago remain freshly relevant today in a way that couldnt be said of past periods. The Crash of 1987, for example, was but a footnote in trivia by 1997. The oil embargo and nasty global recession of 1974-75 had by 1984 and 1985 become just a memory, though painful completely unrelated to the world of the mid-1980s. In early 2007, by contrast, Ben Bernanke said subprime was contained and his fellow policymakers made other such statements that still haunt us today.
Before getting to those, we have to more…

The Brent physical oil market is flashing signs of weakness again as dwindling Asian purchases, an influx of American crude to Europe, and supplies flowing out of storage all combine to recreate a glut in the North Sea.

I am in the Elon Musk fan club. It’s hard not to be in awe of what he’s achieved – four multi-billion dollar companies and he’s only in his forties. I’ve even read his biography, not something I’ve done for many people.

Lots has been written about why he is successful, mostly focused on his drive, vision, tenacity, resilience and intelligence, but I happened on a post morning which highlighted something that was new for me. Forbes columnist Michael Sims was seeking to understand how he has been successful across a wide range of very different industries – auto, space travel, energy and software.

The answer, he believes, is that Elon Musk is an expert-generalist:

Expert-generalists study widely in many different fields, understand deeper principles that connect those fields, and then apply the principles to their core specialty.

That struck a chord with me because that is what good venture capitalists do. In his book The Second Bounce of the Ball, Ronald Cohen, who has a good claim to being the first true VC here in the UK, wrote:

[investors] have to be financially trained and to have an understanding of management, but you also have to have a strategic brain while being sensitive to tactical and people issues

To that I would add empathy, patience, grounding, creativity and hustle. So we have to be generalists in that sense. Then on top of that we need to master multiple areas of investment – at least if you are to have a long career. In my seventeen years in this industry, I have invested in enterprise software, semiconductors, SaaS, social media, adtech, and ecommerce across multiple sectors. That has required a lot of reading! Then right now I am getting to grips with Bayesian Networks, Hidden Markov Models, Convolutional Neural Networks and back propagation as Forward Partners investigates whether to have a big push in what we are currently calling “Applied AI”. Further, all of this applies across multiple industries, from fintech to fashion to healthcare (one of my colleagues is up to his neck in microbiome research as we speak).

You can see the need to be an expert-generalist.

All this begs the question of how one becomes an expert-generalist, or if you are already an expert-generalist, how you become a better one.

The answer is to get good at learning. Fortunately Sims spells it out for us. Here is what he describes as Musk’s two stage process for learning:

Grasp the fundamental principles

Reconstruct those fundamental principles in new fields

There are no short cuts here. Musk used to read 60 books per month. But when, and only when, you understand the fundamentals you can more quickly learn and apply things in new areas. Returning to AI – Bayesian Networks are much easier to understand if you grasp the fundamentals of statistics, and once you grasp the fundamentals of Bayesian Networks (and all the other components of AI) it is much easier to understand where they can be successfully employed and where they can’t. Similarly with regard to human behaviour, a solid grasp of behavioural psychology makes it easier to predict how people will react to new products and services.

And getting good at learning isn’t just important for VCs. It’s important for everybody. The world is changing so fast now that one area of knowledge is most unlikely to be enough to build a career. A quick look at this Wikipedia article on the history of programming languages shows what developers have to deal with, but something similar is true for just about everyone else.